Chapter 2 Strategic Market Planning: Take the Big Picture

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall2-2 Chapter Objectives  Explain the strategic planning process  Understand the three levels of business planning: strategic, functional and operational  Describe the steps in marketing planning  Explain operational planning  Explain the key role of implementation and control on marketing planning

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall2-3 Real People, Real Choices: Decision Time at PaperBackSwap  Which trend should Richard latch onto in order to launch his new service into the limelight? –Option 1: Market the site as a way to help the environment –Option 2: Use PaperBackSwap as a vehicle to promote literacy –Option 3: Position the site as a cheap source of entertainment

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall2-4 Business Planning: Compose the Big Picture  Business Planning: Ongoing process of making decisions that guide the firm both in the short term and the long term –Identifies/builds on firm’s strengths –Helps managers make informed decisions –Develops objectives before action is taken

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall2-5 Ethics and Marketing Planning  Unethical marketing decisions damage the firm, society, and various stakeholders

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall2-6 It’s Debatable Class Discussion Question Adjustable rate mortgages (ARMs) are loans that offer lower monthly payments initially than do fixed rate mortgages. ARMS allow many consumers to purchase homes they might not otherwise be able to afford. However, monthly payments can increase significantly over time—even if interest rates don’t change. Is it ethical for mortgage bankers to offer such products to consumers? Where do you stand? Visit the Federal Reserve Board to learn moreFederal Reserve Board

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall2-7 Ethics and Marketing Planning  Business ethics: –Rules of conduct for an organization  Code of ethics: –Written standards of behavior to which everyone in the organization must subscribe How to Write a Code of Ethics

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall2-8 Figure 2.1 Levels of Planning

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall2-9 Strategic Planning  Managerial decision process that matches firm’s resources and capabilities to its market opportunities for long-term growth and survival –Top management defines firm’s purpose and objectives Example: increase firm’s total revenues by 20% over next five years –Strategic Business Units (SBUs) Self-contained divisions

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall2-10 Functional (Tactical) Planning  Accomplished by various functional areas of firm, such as marketing  Typically includes: –A broad 3- 5 year plan to support strategic plan –A detailed annual plan Example: marketing plan objective: to gain a 40% share of a particular market with three new products during coming year

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall2-11 Operational Planning  First-line managers focus on day-to- day execution of functional plans  Such planning includes detailed annual, semiannual, or quarterly plans –Example: an objective may be set in terms of units of a product a particular salesperson needs to sell per month (sales quota)

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall2-12 All Business Planning Is an Integrated Activity  Strategic, functional, and operational plans must work together to benefit the whole firm  Marketers must fully understand how they fit with the organization’s direction and resources

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall2-13 Strategic Planning: Frame the Picture  Very large multiproduct firms may have divisions called strategic business units (SBUs) –SBUs operate like separate businesses with their own mission, business objectives, resources, managers, and competitors  Strategic planning is done at both the corporate and SBU levels

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall2-14 Strategic Business Units (SBUs) Large firms like the Walt Disney Company usually operate several SBUs. Disney SBUs include theme parks, movie studios, TV networks, and cruise line

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall2-15 Strategic Planning Step 1: Define the Mission  Answer three key questions: –What business are we in? –What customers should we serve? –How do we develop firm’s capabilities and focus its efforts?  Mission statement: –A formal document that describes the firm’s overall purpose and what it hopes to achieve in terms of its customers, products, and resources

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall2-16 Step 1: Define the Mission  Examples of mission statements –MADD: “to stop drunk driving, support the victims of this violent crime, and prevent underage drinking” –National Book Swap: “to become the nation’s largest book club and in the process bring a lifetime of reading material to every American”

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall2-17 Step 2: Evaluate the Internal and External Environments  Situational analysis (business review) –An assessment of a firm’s internal and external environments –Internal environment: Controllable elements inside of an organization –External environment:Uncontrollable elements outside of an organization that may affect its performance either positively or negatively

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall2-18 Internal Environment  Controllable elements inside a firm that influence how well the firm operates include: –People (human capital), physical facilities, financial stability, corporate reputation, quality products, strong brands, technologies, etc.  These elements represent key strengths and weaknesses of the firm

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall2-19 External Environment  Elements outside the firm that may affect it either positively or negatively: –Economic, competitive, technological, legal/political/ethical, and sociocultural trends –Trends manifest as opportunities or threats –Firm cannot directly control external factors but can respond to them via planning Visit Trendwatching.comTrendwatching.com

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall2-20 Trends Present Opportunities Recent sociocultural trends influencing food marketing stem from consumer desires for low fat, low carb, and organic foods

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall2-21 SWOT Analysis  An analysis of an organization’s strengths (S) and weaknesses (W) and the opportunities (O) and threats (T) in the external environment  SWOT enables the firm to develop strategies that maximize strengths and capitalize upon opportunities

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall2-22 Step 3: Set Organizational or SBU Objectives  Organizational/SBU Objectives: –What the firm hopes to accomplish with long- range business plan  Need to be specific, measurable, attainable, and sustainable –May relate to sales, profitability, product development, market share, productivity, ROI, customer satisfaction, or social responsibility

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall2-23 Figure 2.2 SBUs and the Strategic Plan

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall2-24 Step 4: Establish the Business Portfolio  Business portfolio: –The group of different products or brands owned by a firm and having different income- generating and growth capabilities  Portfolio analysis: –Assessing the potential of a firm’s SBUs –Helps make decisions regarding which SBUs should receive more or less of the firm’s resources

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall2-25 Figure 2.3 Boston Consulting Group (BCG) Matrix

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall2-26 Step 5: Develop Growth Strategies  Product-market growth matrix: –Characterizes different growth strategies according to type of market (new vs. existing) and type of product (new vs. existing). –Matrix yields four potential strategies: Market penetration Product development Market development Diversification

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall2-27 Figure 2.4 Product-Market Growth Matrix

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall2-28 Marketing Planning: Step 1  Perform a situation analysis –Builds on SWOT; identifies how environmental trends affect the marketing plan What trends impact the marketing plan for Netflix?

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall2-29 Marketing Planning: Step 2  Set marketing objectives –Specific to the firm’s brands and other marketing mix- related elements –States what the marketing function must accomplish if firm is to achieve its overall business objectives

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall2-30 Marketing Planning: Step 3  Develop marketing strategies to achieve marketing objectives –Select target market(s) where the firm’s offerings are best suited –Develop marketing mix strategies: Marketing mix strategies: how marketing will accomplish its objectives in the firm’s target market by using product, price, promotion, and place (distribution)

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall2-31 Marketing Mix Strategies  Product strategies: –Include product design, packaging, branding, support services, and product variations and features  Pricing strategies: –Include setting prices for final consumers, wholesalers, and retailers based on costs, demand, or competitors’ prices

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall2-32 Marketing Mix Strategies  Promotion strategies: –Advertising, sales promotion, public relations, direct marketing, personal selling  Distribution (place) strategies: –How, when, and where the product is available to targeted customers

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall2-33 Step 4: Implement and Control the Marketing Plan  Control: –Measuring actual performance, comparing performance to the objectives, making adjustments  Marketing metrics: –Return on marketing investment (ROMI)  Action plans: –Support plans that guide implementation and control of marketing strategies

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall2-34 Metrics Moment  ROMI is the revenue or profit margin generated by investment in a specific marketing program divided by the cost of that program (expenditure) at a given risk level, as determined by management

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall2-35 Creating and Working with a Marketing Plan  Written marketing plans encourage concrete objectives and strategies  Operational plans focus on the day-to- day execution of the marketing plan  A firm’s corporate culture determines much of its internal environment—the values, norms, and beliefs that influence everyone in the firm

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall2-36 Corporate Culture The way employees dress reflects their organization’s corporate culture. Think about the way people dress at a firm that is familiar to you. What does the typical attire at that firm “say” about the culture of the organization?

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall2-37 Real People, Real Choices: Decision Made at PaperBackSwap  Richard chose both option 1 and 3 –Richard felt that positioning the firm as a provider of inexpensive entertainment while doing something positive for the environment stood the best chance of success –Implementation: Incorporated recycling symbol into corporate logo; encouraged use of Media Mail; members promoted to others –Measuring success: Over 5 million books posted; usage increased by 55%

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall2-38 Keeping It Real: Fast-Forward to Next Class Decision Time at eBay  Meet Robert Chatwani, General Business Manager of eBay  eBay is developing a new online marketplace to help small producers and artisans gain global access  The decision to be made: Select a course of action that would maximize long-term revenue and social impact

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall2-39 Copyright © 2009 Pearson Education, Inc. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America.